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Developing strategy, put simply, is about determining where an organization aims to be in the future and putting in place the framework for achieving this. However, strategy is by no means a simple process. In this topic, we offer an overview of the three stages of strategic development: Analysis, Options and Selection, and Implementation.
Strategic Analysis
The aim of the analysis process is to define an organization’s identity and purpose. Analysis may be based on either:
- The resources that the organization currently has and the best ways of capitalizing on these (sometimes described as the Resourced-Based View, or an ‘inside-out’ approach); or
- How the organization positions itself within its industry, relative to its competitors (sometimes described as the Positioning View, or an ‘outside-in’ approach)
The process of analysis can itself be broken down into three sub-sections:
1. Purpose - an organization’s strategic aim or eventual goal
2. Environment - the internal and external factors that will affect an organization in pursuit of its strategic purpose
3. Capabilities - the way in which an organization goes about achieving its strategic purpose
Purpose
An organization will articulate its strategic purpose through its vision, describing what the organization wants to be; and its mission, describing what it wants to do. These are underpinned by the organization’s corporate values, while organizational aims and objectives set measurable outcomes. An organization must also assess the factors that could influence its strategic purpose; specifically stakeholder expectations, corporate governance, business ethics, and organizational culture. [1]
Environment
An organization should analyze the external and internal environment in which it operates. It can examine the external environment by conducting a PESTLE analysis to consider the external political, economic, social, technological, legal, and environmental forces that affect it. A SWOT analysis can be used to examine its internal resources (strengths and weaknesses) and analyze external influences (opportunities and threats).
Capabilities
The means by which an organization will achieve its strategic purpose will be determined by the resources and capabilities that it has at its disposal. An organization can identify these by carrying out a resource audit to establish which resources and competences it has; which it needs to acquire or develop (for example, into core competences); and how it should leverage these to achieve its strategic aims.
Options and Selection
Having analyzed its operating conditions, the second step in the strategy development process is to consider the options available and evaluate them in order to select those that are most likely to succeed. This process is known as strategic choice, and lies at the heart of strategic management, dealing with decisions about the future of the organization and its response to the influences identified in its strategic analysis. There may be a number of strategic options available for organizations to choose from, and of those, each will have consequences that will generate further choices.
The alternatives available to an organization might include:
- Options at corporate and business level
- Options for markets or products/services
- Options for resources and capabilities
- Options for methods of development
Options at Corporate and Business Level
This involves selecting the options that best serve the expectations of stakeholders. Decisions at the corporate level might include the nature and range of an organization’s business/operational activities, while at the business/operational level they might include the best methods of delivering the organization’s activities.
Options for Markets or Products/Services
An organization must decide which products or services it intends to offer, and to which markets. This can be done by mapping the organization’s products or services against the market (using a model such as Ansoff’s matrix) [2] and then considering a range of options regarding new and existing products and markets.
Options for Resources and Capabilities
The decision about the products and services that an organization will offer will depend on the resources and capabilities it has. In order to offer products/services to its chosen market, an organization may have to acquire, develop or indeed shed resources.
Options for Methods of Development
Methods of development for an organization include:
- Internal development, where an organization builds the capability that it needs to deliver its strategy through its existing employees
- Mergers and acquisitions, where one organization takes over another
- Strategic alliances/partnerships, where two or more organizations share resources and work together, sometimes for a fixed period or on a particular project
Whichever options are selected, they must contribute to an organization’s end purpose; satisfy the factors that form the conditions for success; and be achievable with the means at the organization’s disposal.
Implementation
The third stage in the strategy development process is implementation. This is the focal point of strategy and without it, strategy formulation remains an academic exercise. Therefore, it is vital that implementation receives as much energy and commitment as strategy formulation.
Once an organization has selected its strategic options, it must develop an implementation plan that should:
- State the core strategic aim
- Allocate actions to specific owners
- Define how these will be measured
An organization must make sure that its organizational structure is designed in such a way as to support the strategy, and if necessary, change it so that the strategy can be implemented successfully.
Likewise, resources must be effectively deployed and the employees equipped with the right skills to implement and develop the strategy.
Relationships should be developed with all stakeholders whose influence could affect the strategy to make sure they are supportive.
Measures of control must be created to ensure the implementation is successful.
Importantly, a communications plan will engender greater understanding and buy-in.
Essentially, strategy is about change, and therefore an organization cannot ignore the softer perspective of implementation. Prior to, and during the implementation process, the organization should monitor, and revise where necessary:
- Culture, which concerns the values, beliefs and norms in the organization
- Power, which concerns the influence that key people can apply to support or hinder the strategy
- Leadership, which concerns the ability of leaders to inspire and motivate
- Performance management, which concerns measurement of activities to make sure they are aligned with expectations
Finally, an organization must continuously monitor the strategy’s progress against the measures documented in its plan and take remedial action to address any underperformance. The organization must also monitor the external environment and adapt the strategy if necessary to take account of any changes.
Conclusion
All organizations should review their strategic position periodically, whether to build on existing success, seek out new opportunities, or make dramatic changes in order to survive. Yet, statistics indicate that only 20 percent of strategies are implemented successfully. Nothing can guarantee the success of a strategy, but following the steps in a logical process (such as described in this topic) will improve the organization’s likelihood of success.
References[1] Johnson and Scholes, Exploring Corporate Strategy (Prentice Hall, 2005).
[2] Igor Ansoff, Corporate Strategy 2nd ed (Penguin, 1987).
